INVENTORY

MANAGEMENT

VITO CARLO M. GENOVE, DBA

 INVENTORY
• A physical resource that a firm holds to in a stock with the
intent of selling it or transforming it into a more valuable form
INVENTORY MANAGEMENT

• Inventory management refers to the process of ordering, storing and using

a company's inventory: raw materials, components and finished products.
• Inventory Management is a business process which is responsible for
managing, storing, moving, sorting, arranging, counting and maintaining
the inventory i.e. goods, components, parts etc. Inventory management
ensures that the right inventory is available as per the demand at low
costs.
 STOCK MANAGEMENT INVOLVES:

• Ensuring that right types and qualities of items are always

available when required
• Ensuring that stock is issued in the correct sequence (first in
first out)
• Maintaining records showing the ‘movement’ of items into and
out of the store, controlling and monitoring those movements
and maintaining full records of the items in the store.
• Ensuring that the correct “stock levels” of the
various items are set and maintained
• Checking, counting or otherwise measuring stock
to ensure that records are accurate.
• Pricing and valuing the items in store
PHYSICAL INVENTORY

• Physical inventory is a process where a business

physically counts its entire inventory.
• Physical inventory is an actual count of the goods in stock. This
can involve counting, weighing, and otherwise measuring items,
as well as asking third parties for counts of inventory items that
have been consigned to them
PURPOSES OF INVENTORY MANAGEMENT

• To ensure a dependable, regular supply of good quality

commodities at service delivery point.
• To help to know when to order
• To know how much to order or issue.
• Maintain appropriate stock levels of all products to avoid stock
outs and overstocking
PERPETUAL INVENTORY SYSTEM

• Maintenance of regular stock records is known as

perpetual(continuous stock taking) inventory.
• It implies a complete and updated account of each item of
stores both on records and physical goods.
• Perpetual inventory means maintenance of such
records( stock control cards, store ledger) as it will reflect the
receipts, issue and balance of all items in stock all the times.
FORMS USED INVENTORY BOOK
S. Name of form AGF No.
No.
1 Purchase requisition form 45
(Kharid Adesh)
2 Goods Entry Report(Dakhila 46
Report)
3 Non- consumable Goods ledger 47
(Kharcha Nahune Jinsi Khata)
4 Transfer form (Hastantaran 48
Faram)
5 Material Inspection Form (Jinsi 49
Nirikchhan Farum)
S. No. Name of forms AGF No
6 Deduction Report 50
7 Request Form 51
8 Consumable goods Ledger (Kharcha hune 52
Jinsi Khata)
9 Stock Annual Description (Jinsi Maujat Ko 59
Barsik Bibaran)
 Government of Nepal
………Office/Dept/Ministry AGF
#45
Purchase Requisition Form
…………….. Purchase
Order #: …………………
…………….. Date:
……………………
S. No. Particul Quanti Unit Rate Total Remar
ar ty Amoun ks
Please submit Date
t for goods
received: ………..
goods ad invoice Place for goods
received…………. as mentioned

Total
 Government of Nepal
……Office/Dept/Ministry AGF # 57
Stock Annual Description
S.N Ledge Particul Stock Goods Not working Remark
o r# ar Remaini in s
ng workin Not be Be
g repaired repaire
conditi d
on
CLASSIFICATION OF MATERIALS

• Consumable materials (expendable)

• Non-consumable materials (non-expendable)
CONSUMABLE MATERIALS

• Those materials which are consumed in use are called

consumable or expendable materials.
• Medicines, gauze, bandage, disposable syringe and needle,
stationery, gloves and others which normally do not need further
accountings and cannot be used after one year are its example.
NON CONSUMABLE MATERIALS

• Materials which are not consumed in use and which retain their
original identity during their period of used such as furniture ,
equipment which normally require further accountings and can
be used after one year.
ESSENTIAL DATA CONCEPTS

• Maximum /minimum stock levels

• Authorized Stock Level
• Emergency Order point
• Lend Time stocking
• Losses/adjustment
AUTHORIZED STOCK LEVEL

• It is the maximum level of inventory of the organization that the

organization can store.
• It is also called maximum stock level
• This level avoids the wastages and other means of losses along
with extra burden to store
• ASL varies for commodity to commodity and from
organization to organization
• District Cold Room can store 2.25 months of vaccine
and other immunological commodity.
LEAD TIME STOCKING

Lead time: The time it takes after receiving an order to deliver the
goods and services to a customer.
• The time lags present in a supply chain from a supplier to the
user at every stage is known as lead time
• The larger the lead time, the more commodities are stored in
organization
EMERGENCY ORDER POINT (EOP)

• There is a level in any commodity in any organization in which the

organization must order or request for the commodities. This is known
as emergency order point
• It varies for commodities to commodities and from organization to
organization
• If lead time and the quantity of item during lag time is known , then
EOP can be determined.
• If the lead time is 2 weeks and average usage is 18 per week,
then E0P= 18×2=36 units
• The day level of stock falls to 36 units , an order will be placed
• In LMIS Nepal EOP is generally considered as one month
expense for any commodity.
MINIMUM STOCK LEVEL (SAFETY STOCKING)

• It is a minimum level of inventory that the organization must

store.
• This ensures the activities of the organization will go on and
will not stop with interruption with commodities.
• It varies for commodities to commodities and from organization
to organization
• The minimum stock level of District Cold store is 1.25 months
vaccines and other immunological relate commodity.
Safety stocking
LOSSES/ADJUSTMENT

• Many times we calculate and demand which we exactly need.

• There is no certainly that all items we are receiving are alright
and ready to use as some items might be defective or damaged.
• There are certain inevitable condition where vaccine and drugs
will be lossed.
 CAUSES OF VACCINE LOSS

Sealed Vial Open Vial

• Expiry date • Remaining amount at end of
session
• Excess deep freezing • Inability to use trace amount of
vaccine from every vial

• Crack, Leakage • If vial is merged in water

• Excess supply than demand • In suspected contamination
• Missing label • Missing label
SPECIALIZED STORE TREATMENT FOR VACCINES,
ESSENTIAL DRUGS AND CONTRACEPTIVES

• Vaccines, Drugs and chemicals are very sensitive product.

• Frequent exposure to environmental factors like light, heat,
moisture and heat particles can deteriorate their quality.
• Deterioration in quality and alternation in physical and chemical
property change in dosage and decrease efficacy.
COLD CHAIN MAINTENANCE

• An uninterrupted system of transporting and storing vaccines with

temperature range 2° to 8°C from the point of manufacture to point of
administration is Cold chain.
• Cold chain maintenance is a term defined as the materials, equipment
and procedures used to maintain all temperature between + 2° to +8°C
from the point of manufacture to point of administration throughout
the distribution and storage process of vaccines.
• In case of Nepal, Cold chain Maintenance includes the delivery
from the manufacturer to central cold store, Teku; to regional
cold stores; to district cold room; to PHCC/HP; to vaccination
centres.
• A breech in the cold chain could decrease vaccine efficacy.
• Vaccine that have been rendered ineffective from cold chain
breach could cause substantial financial losses, and result in
inability to supply the immunization program with the necessary
inventory.
• Vaccines are temperature sensitive.
TEMPERATURE RANGE FOR VACCINE
STORAGE
Vaccin Central Regional District Health Immunizatio
e Cold store cold store Cold Institutio n Centres
room n like
PHCC/HP
Polio -15° to -25°C +2° to 8° C
Measles -15° to -25°C OR +2° to +8° +2° to 8° C
BCG C +2 to 8 C

DPT +2° to 8° C +2° to 8° C

Hep B
Hib
TT +2° to 8° C +2° to 8° C
JE +2° to 8° C +2° to 8° C
The vital elements in cold chain are:
• Cold Chain equipment
• Transportation
• Trained Human resource for maintaining the linl
• The cold chain equipments are:
• Walk in cold room
• Refrigerator
• Deep freeze
• Cold box
• Vaccine carrier
• Ice packs
Walk in cold room:
• They are in regional level meant to store vaccines upto 3 months and
served for different zonal and district of that regions.
REFRIGERATOR
• DPT, DT, Typhoid vaccine and other diluents need to be stored in cold
part having temperature need to be stored in cold region and vaccines
like OPV, measles, MMR, Rabies vaccines shich are highly heat
sensitive need to be stored in freezer
Deep Freezer: It is to be used for storing polio vaccine and freezing of
ice packs
Cold box:
• They are supplied to all peripheral system. They are used to transmit
large quantities of vaccine by vehicles to reach site.
• Before vaccines are placed in cold boxes, frozen icepacks are placed at
the bottom and sides
Vaccine carrier:
• Ice Packs
INVENTORY CONTROL

Control over inventory is :

• to minimize cost of service/production
• To prevent extra expenses on unnecessary purchase
• To prevent improper use of inventory
MATERIALS PURCHASING PROCEDURES

• Different organizations have their own purchase procedure.

• In government sector, when goods are needed for any staff or
department, they must fill up the request form. (AGF # 51)
• It should be approved by the head of organization or authorized
person.
• During approval , the head of the organization will tick on “ issue from
the stock” if it is on the stock otherwise tick on the sentence ‘issued by
purchasing goods from market’.
• Then form is forwarded to storekeeper.
• The store keeper fills up the ‘purchase requisition form (AGF # 45)’ if
there is no goods in the stock and make it approved from
organizational head or authorized person.
• Only after approval of AGF # 45 , the storekeeper can purschase goods.
• Once the goods arrive to store , it is storekeeper’s duty to check
whether the goods are according to AGF # 45 .
• After inspection, he/she fills up the form AGF # 46 (Goods Entry
Report) and has to mention any deviation on the quantity, quantity or
property of the goods in remark column.
• It is mandatory to fill AGF # 46 regardless of the source of goods
( purchase, donation, transfer or others)
ISSUING OF GOODS/MATERIALS

• Goods are issued after approval of the request form (AGF #51).
• To issue goods the storekeeper fills up the AGF 354 (Goods Sanction
Memo).
• Physical inspection of the stock should be done.
• The goods which re damaged, spoiled, reduced due to leakage,
evaporated are mentioned in AGF #50 (Deduction Report).
• AGF #48, 55 and 56 are used to transfer goods from one office to
another
RECORDING PROCEDURE

• AGF #52 is used to record non consumable goods and AGF # 47 is

used to record consumable goods.
PROCEDURE FOR ANNUAL INVENTORY
REPORT
• Every year separate detail description should be prepared for
consumable and non-consumable goods.
• For description of consumable goods, AGF # 49 (Material inspection
form) is sufficient.
• For description of non-consumable goods, AGF # 57 is used.
DRUG/VACCINE STORE KEEPING

Indicates the process of keeping drugs/vaccines in a favorable

environment to:
• protect and preserve the drugs
• maintaining up-to-date recording of their imported and dispensed
• Maintaining feasibility of store room.
The drug/vaccine store keeping can be described into major 2
steps:
[Link] of ideal storeroom
[Link] storage of drugs
1. MANAGEMENT OF IDEAL STOREROOM

It is essential to keep drugs/vaccines in the room, which is capable to

protect and preserve.
An ideal store room must meet the following characteristics:
• Should be cool
• Dark (no direct sunlight exposure)
• Dry (no moisture, floors and walls should be dry)
• Well ventilated
• clean
• Away from mouse, cat and insects
• Should be organized
• Devoid of unnecessary furniture, cloths and other things
• Sufficient furniture, stationary must be available and should be
kept in managed way.
HOW TO MANAGE IDEAL STOREROOM?

• Clean regularly
• Maintain ventilation
• Protection from rats, insects
• Maintain light system
• Maintain dryness
• Organize room
• Avoid keeping other things
• Maintain security system
2. SAFE STORAGE OF DRUGS/ VACCINE

• Select ideal storeroom

• Manage sufficient furniture, refrigerator and other necessary materials.
• Manage sufficient furniture, refrigerator and other necessary materials.
• Keep furniture 1 foot away from wall
• Keep cartons over the wooden planks, not directly on the floor.
• Don’t keep cartons or boxes one above another more than that of 8
feet height.
• Cool items like vaccines need cold store or cold roof or refrigerator
maintaining temperature.
• Narcotics and controlled drugs are kept in one sector and locked
• Keep other medicine in racks in alphabetical order
• Keeping in medicine should be in systematic way.
• Accept concept of FEFO (First expiry first out) or FIFO (First in first
out)
• Frequently observe expiry date , characters of damaged drugs,
physical conditions of room, invention and expel expired and
damaged drugs.
• Don’t use another box unless drugs of broken box are completely
dispensed.
• Keep up-to-date recording